For Justices’ First Day Back, a Knotty Case Involving Medicaid Cutbacks

WASHINGTON — The Supreme Court started its new term on Monday with arguments in a difficult and consequential case over California’s attempt to cut Medicaid payment rates.

The justices were not focused on the ultimate question of whether state officials were entitled to address the budget crisis there by lowering payments to medical providers. Rather, they considered the threshold question of whether the providers and Medicaid recipients were entitled to sue over the move.

The answer was obscured by a tangle of legal doctrines and practical concerns. Medicaid is a joint federal-state program that provides health care to poor and disabled people. States are not obligated to participate. If they do, they receive federal money and in exchange agree to pay rates “sufficient to enlist enough providers” to ensure that care available under Medicaid is similar to that available to other local residents.

There is no question that federal authorities can enforce the law and that states that fail to comply with their obligations face the loss of federal money. Almost as soon as the argument was under way, though, Justice Ruth Bader Ginsburg said such enforcement standing alone was problematic.

Justice Anthony M. Kennedy suggested that private lawsuits may serve a valuable role in supplementing federal enforcement, referring to a friend-of-the-court brief filed by former officials of the Department of Health and Human Services that said, “Fewer than 500 federal employees are today tasked with supervising 56 different Medicaid programs administering nearly $400 billion in federal funds every year.”

It followed, the former officials said, that exclusive enforcement by the federal agency was “logistically, practically, legally and politically unfeasible.”

Lawyers for California and the Obama administration disagreed, urging the justices not to allow private lawsuits.

“I don’t think it is more efficient to have 700 district court judges interpreting a statute that does not have any objective standard,” said Karin S. Schwartz, a deputy state attorney general.

Photo

Members of the Supreme Court, some shown at the State of the Union address in January, started their new term on Monday.Credit
Stephen Crowley/The New York Times

The Medicaid law does not mention such private lawsuits. But the United States Court of Appeals for the Ninth Circuit, in San Francisco, ruled that private parties could sue under the supremacy clause of the Constitution, which makes federal law “the supreme law of the land.” By reducing payments, the appeals court said, California violated the federal Medicaid law and threatened access to “much-needed medical care.”

At the argument on Monday, Justice Sonia Sotomayor said private lawsuits under the supremacy clause have been commonplace since 1824.

Edwin S. Kneedler, a deputy United States solicitor general, responded that the federal government did not seek to bar all such suits, only those challenging what he called “cooperative federal-state” programs that resemble “a contractual relationship.”

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The administration’s position in the three consolidated cases heard Monday, including Douglas v. Independent Living Center of Southern California, No. 09-958, disappointed some of its allies. Democratic members of Congress — including Senator Harry Reid, the Senate majority leader, and Representative Nancy Pelosi, the House minority leader — filed a brief urging the justices to allow the private lawsuits. They were joined by civil liberties and business groups. More than 30 states lined up on the other side.

Justice Stephen G. Breyer described several possible approaches in the case and seemed to find none of them satisfactory. “I see a practical problem,” he said, “and the practical problem is millions of rates all judged by the term ‘sufficient’ and instead of the agency in charge deciding what’s sufficient, we do have a lot of judges.”

Chief Justice John G. Roberts Jr. expressed concern that allowing private lawsuits under the supremacy clause could amount to “a complete end run” around barriers to private lawsuits in other settings. “We have wasted a lot of time trying to figure out whether there’s an implied right of action under a particular statute,” he said, “if there has always been one under the supremacy clause.”

Justice Breyer added that he was worried that too broad a ruling would allow individuals who asserted a conflict between a federal law and a state one to “run right into court.”

Carter G. Phillips, representing the providers and beneficiaries, said his clients would have been content with a court injunction that simply froze rates while an administrative process under the Medicaid law went forward. He added that his clients did not seek a “roving commission” to identify and sue over conflicts between federal and state laws.

Before the argument got under way, Chief Justice Roberts noted a significant anniversary: Justice Antonin Scalia, the court’s longest-serving member, joined the court a quarter-century ago, hearing his first arguments in October 1986.

“The place,” the chief justice said, “has not been the same since.”

A version of this article appears in print on October 4, 2011, on Page A14 of the New York edition with the headline: For Justices’ First Day Back, a Knotty Case Involving Medicaid Cutbacks. Order Reprints|Today's Paper|Subscribe